Speaking at a conference in early June, Vancouver-based Teck Resources Ltd.’s chief executive Don Lindsay raved that his company invested “in the right commodities at the right time,” with a nod to one of its biggest bets — copper.

Lindsay predicted copper soon would hit US$3.50 per pound, at which point his company’s long-planned Quebrada Blanca 2 project — a 300,000-ton per year copper mine to be constructed in northern Chile’s high desert — would add $1 billion dollars per year in cash flow.

“That price is not far off,” he said at the June conference in Chicago, organized by Deutsche Bank, at a time when copper had experienced nearly a year of gains.

But instead of increasing, at the end of June, copper prices started a free fall, dropping 15.7 per cent from US$3.29 per pound to a new one-year low of US$2.77. Benchmark copper fell 1 per cent to US$6,174 per tonne, hovering near one-year lows. Prices are down about 14 per cent in 2018.

Now CIBC Capital Market analysts have pinned Quebrada Blanca 2 — which Teck had suggested could begin construction this year, depending on permitting and other factors — as a likely casualty if a trade war erupts between U.S. and China. It represents one of the ways in which growing fears of a trade war are already hitting the mining sector.

Such fears took hold in mid-June when the U.S. raised US$50 billion in tariffs on China, and an additional US$200 billion this week.

Base metals from copper to zinc have dropped, and it’s rubbing off on mining companies. Base metal producers have already lost $3.5 billion in market capitalization, according to a CIBC analysis of one group of North American companies.

“We expect cooler heads to prevail because an all-out trade war could sink the global economy into recession,” CIBC analysts wrote.

Teck Resources is down 14.6 per cent to US$24.56 on Friday morning from US$28.75 on June 14.

Throughout presentations during the past year, Teck management cited Quebrada Blanca 2 as a top means the company will achieve growth in coming years, and analysts have viewed its largest transactions, including the $1.3 billion sale of Waneta Dam to B.C. Hydro, expected to close later this year, as a means to raise capital for the copper mine.

A Teck spokesman called Quebrada Blanca 2 the company’s “priority growth project,” but acknowledged that expected commodity prices, both in the short and long term, play a role in whether the mine will be built.

The long-term outlook for copper had been nearly exuberant at the start of the summer, with Lindsay and many others predicting a structural deficit, in which demand exceeds supply, by 2020.

Such a deficit could help copper projects weather a slowdown caused by a trade war. Stephen Gill, managing director of Pala Investments and a director of Nevada Copper, said earlier this summer, that based on his review of global copper projects, a significant copper deficit will emerge by 2025 even at two per cent global growth per year.

“The thesis of copper is lack of supply,” Gill said.

Indeed, his company, which is building an open pit and underground mine in Nevada, closed an oversubscribed $96 million offering this week at 60 cents per share — above its current 58 cent per share price.

Mining ore at the Quebrada Blanca Mine.Handout

Still, mining industry executives, from companies big and small, said they are already feeling the effects and fallout from a possible U.S.-China trade war — a battle that by disrupting the normal flow of the market is leaving Canadian companies as collateral damage.

Jack Stoch, chief executive of strategy of Globex Mining Enterprises Inc., a Toronto-based company which develops mining projects — from precious metals, to base metals and rare earths and sells them to larger companies —, lamented the market conditions.

Stoch said one deal to sell a property recently fell apart after the buyer’s stock price declined to the point that the company could no longer afford to front enough shares to match the agreed upon purchase value.

“We had a deal all worked out,” he said. “They paid a $100,000 down payment and while they were doing their due diligence, which took several months, the metal prices kept going down, and their stock price went down to the point the exchange refused to approve the deal because it would have been too dilutive for the company.”

For Medicine Hat, three years of low prices and big losses were too much to ignore

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